Cultural distance, language dissimilarity and trade disputes

Jianqiang Sun, Fahmida Mostafiz, Yumei Cai and Fujing Yang

Applied Economics, 2024, vol. 56, issue 8, 941-955

Abstract: In this paper, we investigate the role of cultural distance in international trade disputes by using a hand-collected dataset of 535 World Trade Organization trade dispute cases covering 158 countries. We find that cultural distance significantly increases the probability of trade disputes and the willingness of a country to initiate a trade complaint. Country pairs with an additional unit of cultural distance measured directly by the Hofstede culture indices have an average 0.18% higher probability of being involved in a trade dispute. Country with a unit farther cultural distance to its trade partner has an average 0.18% higher probability of filing a trade complaint. We further measure cultural distance indirectly from the perspective of language dissimilarity and find that country pairs using a common official language other than their spoken or native language have an average 0.55% higher probability of trade disputes. Cultural costs and cultural protectionism the possible mechanisms are analysed in a general pattern. This study provides a cultural perspective for trade conflict resolution.

Date: 2024
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DOI: 10.1080/00036846.2023.2174932

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